tv Whatd You Miss Bloomberg October 6, 2015 4:00pm-5:01pm EDT
the s&p struggling to add to the strongest rally in the year. there was a slump in biotech shares. joe: the question is, what you miss -- what did you miss? they think the bull market is aging, but not over, we have the charts. joe: the activist hedge fund bill ackman visits bloomberg markets most influential summit in just a few minutes. alix: stock traded near -- after disaster and of september. glencore is not the next lehman. we begin with the markets. s&p 500 posting its first decline in six days. biotech registering another big loss. they down did -- the dow did
manage to eat out. biotech has been the sector to watch. joe: you mentioned them being down 3.8 percent, but it's actually much worse earlier in the day. it was close to 7% at one point. there were a few random headlines about drug price concerns with the story is that this sector just keeps getting slammed day in and day out. byrlet: are stocks being led short covering and we compile the chart -- a chart and the answer says no. what you are looking at is the average short interest level on -- all across the s&p. basically, how short it is, it's actually rising. it hit a four year high yesterday. the reason why that is significant is when you see any credit correction, the interest goes down after a couple of days because people want short coverings. we have not seen a short covering despite that 12% correction. people are still bearish. i would assume --
there is such a big debate about where in the cycle we are. citigroup seeing an increase in global equities through the end of next year. global -- 55% of a joe: you to love all the news these people put out. scarlet: the case here is that analysts -- they forecast it is too high. alix: i will -- i think -- take a look at what happened today in the oil markets. this is a chart of brent. run compared to its moving averages, the 50, the 100 and the 200 day and look at what we saw yesterday. you can see it looking -- you can see it going about that 50 day average and we have seen some followthrough and the reason why that is significant is because it had a big impact on the energy stock in the u.s. it's the same kind of situation here, energy stock above that 50
day average. it's a little surprised that it was not -- that it did not help over -- with the overall. i would look at my terminal real quick because one of the stories we've been talking about is the global growth manufacturing slowdown. you saw that are clearly in this morning's german factory orders. earlier this year they were going in nice, around 2%, month over month. it was the engine of merck -- of europe, the manufacturing juggernaut. now it is growing at a slower rate. a slight improvement from the prior month but not as good as it looks because that was downwardly revised. it's sort of the story with manufacturing everywhere from china to the u.s. joe: that will have to do with -- scarlet: that will have to do with folks like an -- with bold in --nd with all slag with volkswagen.
employed by the supplier, either way you are connected. the emerginge into markets because there is a big debate on whether the e.m.'s are oversold on a massive crisis. this is a three day indonesian chart of the stock. the orange line is the index, it has gone up. the white line is the repeal. we have inverted it for the purposes of this charge. i am very pro-flipping around. scarlet: let's show you what happens when you put it in context. this is the year-to-date chart, it different picture of the mergers. the country's biggest pension fund manager told us that foreign investors will be coming back to indonesia. he has a lot of stake, so why would he not say that? you can check out all of these charts and more at our twitter handle.
alix: was bring in our editor -- let's bring in our editor. stocks were little mess, -- a little mixed. the thursday joe out of blue was like are we in a new range in the s&p and we were like kind of. >> the first half of the year, all we talked about was this trading range we are stuck in. now we appear to be stuck in another range,: 1880 as the low point, 1870. you look today, we get up and of that 1990 level and that is where this range as sort of acted as a ceiling in the past and it seems to do the same thing again today. to me, the big catalyst is coming up and we will do one way or the other when the season starts in earnest in a couple weeks. the earning estimates have just been slashed across the board. we're looking at more than 6% earnings, excluding energy,
totally flat because there are a lot of other sectors that are declining. industrials, it is not just energy anymore. whenever the bar drop that low, it is easy to beat. it could spark a rally at the earnings come in better-than-expected which has been a tradition we have seen. ,oe: another thing we saw today even while we have been in this range, we have seen a steady downward trend in the mix. does this set is up that we could start to resume a steady drip higher as volatility goes into the rearview? >> it definitely written -- has a reduction in nervousness. looking forward, as much as it is on board options and prices, it is more or less a story of volatility. as a comes down, people are more comfortable but i would not use that as a signal.
they use the old rhyme, the time to buy is when it's high. people at the see that nervousness -- they want to see real low readings in sentiment in analysts before they feel comfortable about the bottom. scarlet: when you look at leadership, we found out that when you thought to enter the fourth quarter in the red, the liger's turned into leaders. that what you see here is they post a 4.6% gain in october and that outperformance widens to more than 7% in november going back to normal in december. is this more proof that the recent rally is driven? >> i think we are seeing what you just said. out,t 24 when we bottomed the best performing group has been energy, up about 12.5%. oil has been a bull market since then. it's up 20 some percent.
a lot of that is driven by the news, with a focus on the prices and biotech stocks. it is that reversal you talked about. joe: mike rieger, pace for joining us. scarlet: bill ackman is joining us. he just sat down for a rare conversation with stephanie role. >> you have all kinds of that requiretegies delta hedging, adjustments funded, dealers base it on -- based on movement and stock prices. there's no place you can look it up that does seem to make an -- a big impact. stocks get pushed a direction on the basis of a news story and the movements seem to be exaggerated. the question is almost a policy question whether these are good for capital markets are not. you have the compounding effect of fear. the stock goes down, it goes down more, and allows you the
opportunity to sell and people do and very often they sell the opposite of when they should. >> fear is not a word we ever associated with you on your style of investing. when you go through a market like this, does it make you think you want to hedge? >> we hedge in different kinds of ways. hedgege -- we try to intrinsic factors we can control, sort of like swan type of events. swan type ofack events. >> for you, copper, oil, -- >> largely irrelevant. more or less oreo cookies on the paces -- on the basis of copper. >> i would say glencore element
focused -- a little bit focused. we have seen prominent hedge fund -- hedge fund managers in the credit to size dtf and they have said -- criticize etf and you will see etf just as dangerous as structure projects -- products were in 2006 and 2007. august 14 when we saw the dow ticket dive, credit spread widened out, we saw nothing happened to etf. are they were bulletproof than we thought? >> you had etf with issues in terms of pricing and assets where they were treating to their underlying components. i don't think it's a great industry -- instrument. maybe it is from a trading point. when investors are not focused on long-term business fundamentals and deciding what
they buy and sell, it can lead to anomalous outcomes. this is bad for the retail investors that can get nervous watching stocks moved erratically. >> i mentioned them only because when you turned -- when you turn to hedge funds, they asked for 15 and 20, it's a lot, especially when they don't perform. when you look at the current environment and all these funds getting smote, is it bad investment or bad investors? when you look at private equity, they look like heroes and champions in a last five years but i'm equity investors do not have to mark to market. hedge fund managers are expected to provide their investors with quarterly, monthly, weekly, sometimes daily quiddity -- daily liquidity. >> i would say people say they prefer or like there are allocation of equity because it is less volatile than the hedge
fund portfolio. >> they could give that same money to hedge funds. >> private equity is leveraged. -- it would be a multiple of the movements in the stock market. because private equity march the market quarterly and there is a lot more possibility in assigning values, it it looks like a much lower volatile strategy. i don't blame the investor so much in hedge funds, but if you think about it, that i of business is invaluable cash intake out over his life. if life is hopefully 5200 years -- 50 to 100 years. -- or tweak that hillary clinton points out or -- people are going to make investment decisions on adding or subtracting capital to a manager. i invest a tiny amount of money but with a few hedge fund managers.
what i care about is are they investing in high-quality businesses. volatility is opportunity for the investor to add at a time when you think the price -- >> you mentioned hillary clinton's tweet. as is -- has this changed your view? >> it's a very interesting area. i think bloomberg put out a piece on direct pricing. there was a cover story that talked about the top three drugs and the average price increase over the last several years, it was like 60% average. drug pricing is something that is pulling well for hillary clinton. it becomes a campaign issue, but if you think about -- i think a big picture approach -- here we have the most innovative bio pharma industry in the world and the reason for that is you can make a lot of money in drug business. those profits get redeployed into r&d and they get redeployed into buying accessible
biotechnology companies and the more n and you get a self filling prophecy of more innovation. i think that this cycle we want to continue. if you are a consumer and all of a sudden your drug goes up massively in price, that's something you will be sensitive to. there is a lot of misinformation. the gross prices that are talked about in terms of where mark -- artemis -- pharmaceutical drew the cash pharmaceutical companies -- pharmaceutical companies mark up prices. >> ethics seems to be one of the central issues and clearly ethics is important to you when you look at herbalife. you been on this crusade against them because you think it is such an unethical company. in terms of what we've seen in truck pricing, a hedge fund manager buying a company that sells a drug to patients who
have hiv with the price at seven dollars and ajax it up to $700, in your opinion, it's legal, he is exercising his right in the free market. is it ethical? >> that's not my favorite version of how to make money. those glaring examples are going to attract a lot of attention. there's been out -- a lot of attention on value -- on valium. their business has been repricing drugs. one of the things were clinton spoke about in her health plan was a requirement that pharma companies spend a certain percentage of the revenue on r&d. this sort of forced spending. >> which is not what valium does. >> they were criticized. onlyoint was valium is spending 3% of the revenue on r&d. was interesting about valium is re-think they have made a
massive contribution to drug development, more so than any other company. >> how so? >> you have to follow the money. valium does not pay a dividend, there is no cash leaving the system. they don't buy back stock. they spent 3% of revenue on r&d. this than moneymaking pharmaceuticals, they pay employees. that's my point. valium believes that they are not good at drug development or coming up with new molecules and taking them to the approval process. that has been a lower turn business and their view is the startup biotechnology companies can use your recruit top scientists. today if you are a top scientist in the space and you want to make some money, you can go work and make a few hundred thousand dollars bonus and come with a drug or get back by a venture capitalist and form a company and discover a drug and make a
billion dollars. it used to be that all the innovation technology came from the big ibms of the world. which you canogle think of as an innovative company, most of their innovations when you think about , google glass, most are coming through acquisition. they are buying startups where a very talented out of, backed by a venture capital, develop summative they wanted to acquire. valium to the same thing and by enabling on governors and venture capitalists to monetize their products, there is a recent example is a company called sprout. the female sex drug. >[laughter] hypo sexualmen with disorder. >> right now i feel that.
[laughter] >> let's keep it that way, we are on tv. that hundreds of millions of dollars were spent developing. the first company that developed the molecule fail to get the drug approved and was sold to this company sprout and they invested tens of billions of dollars, getting the drug approved. the moment it was approved, valium bought it. people put capital get the struggle proved so now we see the return of the capital. we see return on their capital. they made money that attracts capital to the startup, new drug, biotechnology space and that process leads to more drug development and its getting done by talented entrepreneurs, talented scientists would rather work for the start up then be in the big rocker jimmy massive pharmaceutical company. when you buy a drug company, you are bawling -- you are buying a portfolio.
valley and takes the drug. they are good at marketing and a tradition of sales and they run a very efficient model on their making a massive contribution. if you regulate prices and say you can't charge market for a drug, that's going to reduce the profit. that's when you reduce the returns the entrepreneur, scientist, the startup can receive starting a drug company. there is an egregious 50 to one mark of some old drug that was acquired, but i don't defend that kind of behavior. i do think it is important that this does not lead to regulation that basically cut back on innovation. >> does this change your view on value him in anyway -- on valium in any way? >> is a very different kind of company from bircher haply.
they have an advantage in running one of the most efficient pharma companies in the sector, a sector not known for efficiently managed businesses. they are extremely shareholder friendly, focused on cost control and disciplined about investing capital. him a competitive advantage, he ends up being the high bidder for many products and companies because he layers that product onto his business. he can more efficiently extract profit from that product. that leads to more profits front burners and more returns for investors to invest in. that leads to more innovation. they've done some philanthropic stuff on the cancer research side. the fact we can personalize medicine and design drugs to deal with some -- you don't, but some people have genetic defects and you can address some of those issues with drugs, that leads to miraculous cures for
.epatitis, perhaps narcissism >> clearly the stock has gotten smoked, have you added on? >> we have a big position at valium. if i do think one stock out of the 10 we own that's the most undervalued, it will be valium. written -- ridden the stock down, you've seen investors lose a ton of money. what do you think about the fact that you've seen some of the guys sell that the fundamental -- or a few have, they just attract you and in your draft, they have risen up with you and are just puking it out. glad to see these guys go down? --i did not forget their day
i did not predict their day. >> what can you do with valium that they could not do? case -- i-- this is a guess i can help them with pr. they are not good at the yard and perhaps government relations and that is something -- they went from being a small farm a company to being a very big one really quickly. they are a bit of an outsider company. every major drug company advisor , biogen, is guilty of raising prices fairly aggressively and the model in the u.s. is you develop a molecule, you get a patent for 20 years, you spend 10 years getting it approved and you have a tenure window -- this is assuming you didn't you -- you can get it approved. you can waste billions of dollars on a drug not getting approved. you have a tenure window in which you make your profit. it's only a windfall profit if
you look at this particular drug the got approved and sold. it's not a windfall if you look at the 95% of the other drugs that lost all their money. you have a system with a patent that allows you to earn a monopolistic profit until the generics come in that encourage people to invest in the sector. that part has worked really well. there is some dysfunction in the pricing. >> have you considered your investing approach with smaller companies? >> with us, i like to keep life simple. >> when you talk about -- we need to talk about nelson told us a moment. we spent an enormous maritime working on ge. theye midst of it, announced a real estate transaction. >> the blackstone?
>> the blackstone. i think nelson is correct, the direction ge is heading in is direct. they are a very well operated company, one that has been an absolute though your and the way they have allocated capital. if you look at their venture into -- and eventual exit, their entrance into the world of gas -- the gas and rich -- the gas industry, they have not done a good job of the capital. if all they had done is stuck to airplane engines and kind of the court ge businesses and brought backstop and -- brought back stock and paid dividends in 20 years, -- it's similar they've done is used the cash flow and growth and value of the business that comes from the core businesses to make a series of acquisitions that turned up poorly -- turned out poorly. in ge, you have to show your stuff by doing deals and it's
really the dealmaking part of ge that has been a problem, not the way the businesses are run. a lot of very talented ceos have come out of ge and it's one of the best training programs for running a business. it's a terrible place to learn how to invest money. >> you did a lot of work on ge, now nelson has stepped in. will you be next? >> we decided it was not cheap enough. be --hink it's going to markets going lower. >> and it's going to be a fine investment. they are getting out of the -- they've got very little value from the finance business and they restricted their ability to use a balance sheet otherwise and it caused all sort of regulatory oversight and other issues. handled -- on the ceoe taking job, make sure your stock is not
overvalued. >> what we've seen happy with -- happen with dupont. nelson wins again. >> she won the battle, lost the war. if she had welcomed him and, she would still be ceo of the company. , andought to the death again a not close and again i'm not close enough to dupont, but my sense is it looks like the board lost confidence on yet another earnings guide down. commitments and promises were made that were not lived up to very shortly after and it makes nelson look right and her look wrong and perhaps they decided to pull the plug. >> she did not work with nelson. are you working with him or on the same page at least? >> working with him, i would say we are both big shareholders. he has access to information we don't but i think our thesis --
are similar. >> does it give you posit some people believe heinz looks great, there is huge potential, but the possibilities are also -- already priced in. when you see a deal announced, you are super positive on 3g. when you see 3g and a deal, the market loves it but we had not actually seen the results. since we haven't, is that give you -- does that give you pause? 3g acquired burger king. made a deal to merge a company with burger king. we took that business public and in the first 20 months of ownership, burger king continued to have -- it took a number of important steps. they sold off stores to the
franchisees to put the stores in the hands of the best operators. they redesigned the re-imaging program so they could redesign the burger king box for less than half the cost of what the previous management had figured the cost to renovate the stores. program fora loan them to borrow money to do it. franchisee started investing in the stores. they improve the marketing message inserted thinking smarter about social networks. rather on the 20 month. of time -- 20 month period of time, they sure to see a return. they grew the business i are doing with the best 11 companies. they also took a huge amount of cost of initially and a lot of people were shocked that they took a third of the overhead out of the business in the first 90 days of owning it. skepticism was that they were putting into the bone. the reality is, burger king is the -- has the highest
same-store sales performance of any major fast food company. the stores are cleaner, nicer and the best innovation, they have the best marketing and they are crushing mcdonald's. heinz, 18 months, they have cut a lot costs and sales were down slightly. you will see a more efficient and profitable business. you will see the same thing at craft. they are not just cost cutters, they are smart about talent recruitment, incentives, cap allocation and they are changing -- they set a new bar in the food space and companies are going to either have to meet that standard on their own or they will be required -- acquired by 3g and we will have one owner of the food industry. >> and possibly the beverage industry. what do you think will happen here? >> i don't know enough to know. 3g?o you believe in
we talk fannie and freddie, up today. >> there is a research firm -- i don't know the name of it. they put out a piece saying that confirmed by multiple sources in the obama administration that there is a big -- a bit of a rethinking about fannie and freddie. after the crisis, the believe is that they need to be shut down. here we are, seven years after the crisis, they are more prominent. private capital has not shown up any material way. banks are not holding onto mortgages they shouldn't. realize that they will stay and the question is how to deal with them. that thee also said obama administration's concern that the next administration is
your public and and it will be anything -- is republican and there will be anything to protect housing -- global housing going forward. the opportunity is, you've got what is a private company, shareholders still own 20% of the company. the government owns 80%, the government has lent money to the company which has been more than paid back. there's an opportunity for a settlement with the shareholders where there is plenty of room between what the business is worth and -- rebuildct the taxpayer, the capital, we does need some time to negotiate with. i can't speak to the accuracy of this report. prevails, there is an opportunity to resolve fannie and freddie in a way to minimizes risk the taxpayer and maximizes profit. >> i have to use my time judiciously. herbal life, anything new? >> none i can report.
[laughter] >> productions for next year. 2016 productions, tell me something i have not heard. the big idea, what you looking at, thinking about? i have the equivalent in politics. my view is, michael bloomberg will run for president. and he will win. [applause] i did not know it was going to happen. >> i was at the bloomberg conference. >> why do you think this? >> is the most qualified candidate. he's done an exceptional job as mayor of new york. he's a first-class person who tells the truth. he's very pragmatic, so he will not run if he thinks he can win -- can't win.
the run for the presidency on both sides create an opening for mike bloomberg and a way -- in a way that there has not been an opening before. he once said he can't become president, nobody wants to vote for a billionaire. there is now a billionaire in first place in this billionaire evenly has more money -- trump -- if my grand, i think that he wouldy love mike to run the country. -- has hillary is not not proven to be a strong candidate. you have weakness in the democrat side. you don't have a credible candidate. yeah disarray on the republican disarrayh -- you have on the republican side which creates an opening for mike bloomberg.
a business oriented, philanthropic, commercial, honest straight talking guy to run for office. and they get the best weathervane of how people would vote for his candidacy. i think it's true. >> you think it's true or you would just like it to be true? when people talk about why they like donald trump and his or her to describe him, when they described him what they perceive him to be, those words are actually kind of words you would use to describe mike, not necessarily donald. >> people say they like trump because he is a straight talker and has proven to be successful in business. >> and entrepreneur. >> people have other things to say about trump they don't like. i don't think bloomberg has those negative attributes. it's all the best of trump without the worst and that to
me, is a winner. >> this is a great idea. great idea ifen a george clooney chose to marry me, but he did not. [laughter] thinks it that makes you -- what makes you think there is a chance he actually well? you have to have the desire to do that and you know what it's like, in your position as a private citizen, -- >> i think i can put myself in his place. i have some sense of what it's like to be mike bloomberg. these -- he's 71 or however many years old. he's in great shape and has made a major contribution. the answer is because he's going to die. he -- you say life is too short and he's that can of guy. he could spend his life as a philanthropist but i can tell
you from philanthropy is the return on investment is not nearly as high. he wants to have the greatest single impact on the world in a philanthropic way. when he's 90 or 100 looking back , he will regret not running. sort of my argument for not having a third child. this is his chance and this window is now or never. i think he will do the calculus and he will say it makes sense and i'm sure he's already doing it. >> and you would support him. >> i would do everything in my power to get him elected and i would recruit massive numbers of people. he always he does not need money. the thing with people like trump is he does not know anything to anyone. people say that because he's rich. bloomberg is the same way, completely independent. [laughter]
>> are you already supporting any candidates? bloombergm supporting -- no, i am supporting bloomberg. [laughter] >> all the points you are making are fantastic. does this mean that when you look at something that we look at your life, there is something you would like to do? >> sure, but i would want mike to do it first. >> thank you so much. [applause] dallas bill ackman with bloomberg's stephanie ruhle at the bloomberg markets most influential summit in new york. talking quite a lot about politics but he did hit -- he pushed a bit on value. they are seeing an increase in drug pricing. he could behind it and said they are doing things with that money
and the market needs it. joe: people on twitter say he is valiant.r defender of prices -- high prices or how you get profits which is hagan investment so, that's the bull angle. scarlet: is not making any excuses for it, he says that's how you drive innovation. other companies do it another way. it's not just -- necessarily to defend it, but that's how it works. alix: you pointed out his biggest stake is in valiant. scarlet: clearly very committed to it. let's get you mark crumpton with first word news. sayse white house president obama will travel friday to our again to sign -- the site of last week's last -- mass shooting. 94 killed and nine others were wounded on the campus of umpqua
community college. committed suicide during a police shootout. the air strike that killed 22 people at an afghan hospital over the weekend was a mistake. the admission came from the top u.s. commander in afghanistan. he said american forces would never intentionally target a medical facility. general campbell also told lawmakers he thinks obama should revise plans to reduce the american forces in afghanistan. about 6000 american federal inmates are getting an early work -- release. it's part of a land to reduce overcrowding and provide relief to drug offenders sitting out harsh prison sentences. if the largest ever one time release of prisoners. south carolina is getting a break today, the rain is finally tapering off but officials warn
floodwaters will continue to rise in some parts of the state. at least 15 people have died in south carolina with two other fatalities reported in north carolina. 40,000 residents are without trackable water. president obama has clear the way for emergency aid. young earnings came out and they are disappointing for anyone whose model -- you has shares of young. revenue rose-- from last year to halt four quarters of revenue decline. -- alix: it's an unbelievable miss. it was not just china.
india was down about 18% so getting hammered across the board. joe: yum was seen as a great china play and the fact that they are getting destroyed this much suggests that if you think all the china slows downs -- bloomberg markets executive director -- editor joining us now. this is fascinating because yum had said that comfortable sales had turned positive in china in august which means a september must have been really ugly. >> the interesting thing about the story as we talk about how sketchy china's economic data is and we don't trust those official numbers, you have to look for proxies one of the best is to look at their sales of foreign companies and what they are doing in china. we now see this weakness in young and the fast food market. we have previously seen weakness in luxury car sales, wine and alcohol sales, it almost seems like some of that weakness is
starting to filter down from the high level luxury goods to sort of more mass-market consumer. alix: how much does -- there was a food sourcing issue, a mistrust of state chickens with young -- with yum. andhat's a good point because of that, a chosen easy yuparison for young -- m. it goes back to how bad september must of been. alix: what can happen for the rest of the year? i tried the s&p over the last 30 years in their second half performance of the year and this is the chart. over the last 30 years on average, the market has bottomed around october 8, october 9 and then climbs about 5% from that level. this research comes from
oppenheimer and they say based on this data, you have to go to the fourth quarter position for some kind of rally even though there might be -- if you look at history, there could be more bullish. me. staggering to the last six years we have had this bull market that is aging. 30 years is a pretty good time frame. joe: i'm what the dive into my terminal because we got this news this morning that one of the top investors at franklin templeton resources, the big money management company says there is a gigantic opportunity in emerging markets. here's a huge chance -- a chart i made the chose franklin resources, the white line, the parent company of franklin templeton and the yellow line is the emerging markets. it's funny how close they line up.
they both may be proxies for risk. by glenn tilton also has exposures around the world similar there is some connection. i'm thinking that if emerging markets rally, you are probably going to see a bounce back in franklin. do you have any thoughts on the big asset managers and how they are exposed right now? >> i can see how krugman templeton would talking up emerging markets based -- even if you think there is value in that market right now and isis of undershot their failed value -- their fair value, it's like catching a falling knife? you don't know what markets will do, they tend to be irrational. >> dear point, the templeton's fund manager has said that he sees a opportunity to get into emerging markets right now. >> for my deep dive wanted to show you how the third quarter for stock -- but you would not know it necessarily by looking at the ipo market in western europe.
this shows a value of the deals in the region and there are $11 billion worse into september, that's the highest in more than a year. it's a very sudden because the cap me load number in the previous two months. could that be a sign of her nude confidence because the history has shown that 7 -- sudden jumps and ipo have proceeded stock market rallies. >> there is some truth to that. the that -- the thing happening in europe right now is monetary policy changing. about the fed possibly tightening, although that seems further away. it is different monetary policy situation in europe. some fundamentals but it is a liquidity situation. joe: -- yet to figure there is something of a backlog by now. if window opens a little bit and you have all these companies that have been waving and it seemed like they might be seeing that with the easier monetary policy and the return to growth. >> nonetheless, ipos are quite
significant. citigroup was talking about -- seeing 20% outside of the global markets, then 16 criteria for the end up searching for bear markets and one of them is the percent of ipo's. that's how the indicated, so that's actually a good indicator. >> citigroup like europe, u.k. and japan because of the monetary policy. coming up, we will dig into glencore's roller coaster ride and talk to one person telling people to get a grip. ♪
comeback trail. it rose to a two week high today after the company released or details on its finances. thatthey wrote in a note ivan glasenberg is blaming everybody but himself for glencore's troubles. -- a professor of finance and the energy market, director of the global energy management institute at the college of it business at the university of houston. who do you blame? the market, the commodities market have been down very dramatically, particularly driven by slowing and glencore had a big exposure to copper and gold prices in can -- in particular that's what it's planes its fate. is: when ivan glasenberg blaming other hedge funders and mining companies for abusing to off-line unprofitable things.
in that he right should be blaming himself for having so much exposure? >> so much exposure to china and the relatively heavily leveraged balance sheet as opposed to other mining firms. i do consider it ironic that a trader blames other traders for his fate. scarlet: talking about trading versus the mining business, there is a lot of conversation about how they could be the next lehman. could your break down the comparison of white that's not true? >> first of all, you talk about too big to fail, and terms of sale -- -- glencore has a balance sheet of about $150 billion. lehman had a very fragile balance sheet which balanced short-term money in order to finance long-term investments. glencore does not, they are -- they have much less leverage.
close to theeven amount of leverage that lehman or other banks and investment banks had in 2007. i think the biggest factor is that lehman was more of a symptom of a broader problem in the financial market. it was as much of a casualty of the overall financial system as opposed to the cause of that. the conditions are relatively quiet, we don't have the financial crisis that started in 2007. now.s are much different scarlet: a lot of people expected the lehman brothers to get bailed out by the government and it wasn't. we were talking about whether someone or some agency whatever intervened to bailout glencore. can you imagine it's an area where the might be possible? >> i think it's totally unimaginable. you have to wonder who would do it. one of the reasons that bernanke
bailing outr not lehman was that he did not have the authority to do it. joe: you have written that glencore aside, the commodity trading firms just can't been systemic -- just can't be systemic. why should we not worry about these types of firms from a systemic standpoint? >> if i tried to figure out the biggest ones, first of all, they have very different balance sheets then financial institutions. one of the problems with financial institutions that makes them fragile is that they borrow short and livelong. most commodity trading forms avenue matching ellen sheets. fake relay, a lot of their assets are very liquid, inventories of oil or lick -- or topic -- or copper.
glencore is the biggest and it's one fourth the size that lehman was and other firms in the commodity trading space are smaller than that. there's just a variety of different factors which very much differentiate these firms. the important thing is that financial institutions may transformations and liquidity and maturity and that's what makes them fragile. that's not what commodity trading firms do. alix: i have tried to find this answer for years. do you know how much of the futures market glencore does control or play based on its trading unit. a mayason why i ask is not have lead over to other areas, but at the end of the day, they are forced to liquidate some kind of position in order to pay for the mining aspect of the business, does that create a lot of turmoil in the futures market? >> i don't know the exact numbers.
first of all, it depends on the markets, oil or copper. it's going to be much bigger and copper that in oil. these are relatively liquid markets and we have seen situations where big entities have had liquidation issues. years, -- about 20 and oil position that had to get liquidated. it had some disruptive effects on the markets but not a huge one and if anything now, the markets are deeper and more liquid and they would be better able to handle the issue. joe: what glencore be doing fine right now if it were not for the mining side? >> i think that that would be -- it would be doing much better as a trading business if it were -- then if it were a mining business. one of the issues is that the strategy behind the combination is that the trading positions would help out the cyclical nature of the mining business,
but what has happened is the cyclical nature of the running business has called into question the viability of the trading business. it's a question of whether those two things should remain together. other trading businesses have done pretty well in this current environment. it's time that trading company -- it's tying that trading company to the money business which is causing all the problems. alix: so breakup? >> it depends on how they whether this current storm. yet the take dramamine and follow the stock these -- you have to take dramamine and follow the stock be days and see what shakes out a little bit. that should be a strategic consideration or option that remains on the table. alix: thanks so much. i should mention, -- coming up next, we will
scarlet: i'm scarlet wu, what did you miss? no first meeting tomorrow, changes expected, everybody is focused on the october 30 meeting with policymakers police the economic forecast. last year, the meeting was when they surprised the market. joe: don't miss the consumer credit for august coming out. economists expect about $19 billion in new credit. there is all sorts of stuff involving credit, like credit card debt. looking at this report, it will
john: i'm john heilemann. mark: can i mark halperin. -- and i mark halperin. john: on the show tonight, and two dudes in manhattan and i don't mean us. candidatesto legacy about their messages and whether they can secure their party's nominations. hillary clinton and jeb bush are both in iowa today.